Work, pay & shifts
How to Calculate Your Freelance Hourly Rate
A freelance rate has to cover a year’s income and the business that earns it, from fewer hours than an employee is paid for. Most underpricing comes from dividing by the wrong number of hours. This guide gives the formula, a worked example, and the adjustments that matter most.
Ready to try the tool this guide describes?
The formula
Minimum hourly rate = (income + business expenses + buffer) ÷ billable hours a year.
Step by step
- Income you want before tax: $80,000.
- Yearly business expenses: $12,000. Together: $92,000.
- Working weeks: 52 less 6 weeks of holidays, leave, and gaps = 46.
- Billable hours a week: 25, after admin and finding work. A year: 46 × 25 = 1,150.
- Rate: $92,000 ÷ 1,150 = $80.00 an hour.
Why not divide by 2,080?
2,080 is the hours in a full-time employee’s year — 52 paid weeks of 40 hours. Divide $92,000 by 2,080 and you get $44.23 an hour, barely more than half the rate this example actually needs. Billing $44.23 for 1,150 hours brings in about $50,865.
How billable hours change the rate
$92,000 a year over 46 working weeks:
| Billable hours a week | A year | Minimum rate |
|---|---|---|
| 20 | 920 hours | $100.00/hr |
| 25 | 1,150 hours | $80.00/hr |
| 30 | 1,380 hours | $66.67/hr |
Then check the market
The result is a floor. If clients in your field routinely pay more, charge more. If they pay less, the gap is information: lower expenses, more billable hours, a different niche, or a different pricing model. A day rate at this floor is the hourly rate times your billable hours a day — $80 × 7.5 hours is $600.
Freelance Hourly Rate FAQ
- Should I charge hourly or per project?
- Either can work. Even with project pricing, an hourly floor tells you the least a project of a given size must pay.
- Should holidays be in my hourly rate?
- Yes — reducing the working weeks spreads the cost of unpaid holidays across the weeks you do bill.
- How often should I review my rate?
- At least once a year, and whenever your expenses, hours, or the market change.
- What should my billable hours a week be?
- Your realistic estimate after admin, sales, and gaps — often well under 40. Track a few weeks to see what you actually bill.
- How do I turn the hourly rate into a day rate?
- Multiply it by the billable hours in a day: $80 an hour for 7.5 hours is $600 a day.
Related guides
- Freelance ExpensesThe business costs a freelance rate has to cover that an employer used to pay: an example $12,000 budget, what each line adds per billable hour, and how to spread big purchases.
- Freelance Tax Set-AsideHow to gross up a take-home income goal for tax, why multiplying by 1.25 comes up short, a table of set-aside rates, and practical ways to put the money aside. Not tax advice.
Open the tool
Jump into Freelance Hourly Rate Calculator when you are ready to process your files.
